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Tax Matters
 3 Months Ended
Mar. 31, 2019
Income Tax Disclosure [Abstract]  
Tax Matters
Tax Matters

A. Taxes on Income from Continuing Operations

Our effective tax rate for continuing operations was 10.0% for the first quarter of 2019, compared to 13.5% for the first quarter of 2018.
The lower effective tax rate for the first quarter of 2019 in comparison with the same period in 2018 was primarily due to:
•
the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the enactment of the TCJA;
•
the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, as well as
•
an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years, and the expiration of certain statutes of limitations.
Our estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings for which we plan to elect, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, payment over eight years through 2026 is reported in Income taxes payable ($750 million) and the remaining liability is reported in Other taxes payable in our consolidated balance sheet as of March 31, 2019. The first installment of $750 million was paid in April 2019.
B. Tax Contingencies

We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution.
The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, the IRS has issued a Revenue Agent’s Report (RAR) for tax years 2009-2010. We are not in agreement with the RAR and are currently appealing certain disputed issues. Tax years 2011-2015 are currently under audit. Tax years 2016-2019 are open, but not under audit. All other tax years are closed.
In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada (2013-2019), Japan (2017-2019), Europe (2011-2019, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America (1998-2019, primarily reflecting Brazil) and Puerto Rico (2011-2019).
C. Tax Provision on Other Comprehensive Income
The following table provides the components of Tax provision on other comprehensive income:
 
 
Three Months Ended
(MILLIONS OF DOLLARS)
 
March 31,
2019

 
April 1,
2018

Foreign currency translation adjustments, net(a)
 
$
27

 
$
(34
)
Unrealized holding gains/(losses) on derivative financial instruments, net
 
59

 
(4
)
Reclassification adjustments for (gains)/losses included in net income
 
(55
)
 
(7
)
Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
 
—

 
1

 
 
4

 
(9
)
Unrealized holding gains on available-for-sale securities, net
 
5

 
20

Reclassification adjustments for (gains)/losses included in net income
 
1

 
(22
)
Reclassification adjustments for tax on unrealized gains from AOCI to Retained earnings(c)
 
—

 
(45
)
 
 
7

 
(47
)
Benefit plans: actuarial gains, net
 
—

 
38

Reclassification adjustments related to amortization
 
3

 
14

Reclassification adjustments related to settlements, net
 
—

 
9

Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
 
—

 
637

Other
 
(5
)
 
(20
)
 
 
(2
)
 
677

Reclassification adjustments related to amortization of prior service costs and other, net
 
(11
)
 
(11
)
Reclassification adjustments related to curtailments of prior service costs and other, net
 
—

 
(7
)
Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
 
—

 
(144
)
Other
 
—

 
6

 
 
(11
)
 
(155
)
Tax provision on other comprehensive income
 
$
25

 
$
432


(a) 
Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.
(b) 
For additional information on the adoption of a new accounting standard related to reclassification of certain tax effects from AOCI, see Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.
(c) 
For additional information on the adoption of a new accounting standard related to financial assets and liabilities, see Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.